Turnbull and Morrison’s 2016 federal budget let-down
Twelve seconds into Scott Morrison’s budget night speech, it looked as though the Turnbull government would finally begin delivering the promised excitement and vision. “Australians,” he said, “know that our future depends on how well we continue to grow and shape our economy as we transition from the unprecedented mining investment boom to a stronger, more diverse, new economy.” He could not have summed up the situation better when he said everyone knows that “their jobs and those of their children and grandchildren depend on it”.
But from there, the vision was lost in a fog of platitudes and a repetition of the word “plan” 21 times. Morrison, we were told in this motherhood statement, was all about “jobs and growth”. But completely ignored was the reality of climate change and the imperative the rest of the world sees in responding to the transition from black energy to green energy. This was more than an opportunity missed, it was a wilful blind eye to an emerging central economic reality.
What is all the more disappointing, it comes from the treasurer in a government led by a man whose brand is intimately identified with the reality of human-induced global warming and the imperative to shape policies to ameliorate it. Greens leader Richard Di Natale told ABC TV he would boost the economy by boosting “the innovation drivers” such as the Clean Energy Finance Corporation. “If this was a budget delivered in any other developed country around the world and it was silent on that big transition,” he said, “people would be laughing at the government.”
But it was worse than merely not shaping a vision for bold policies that might encourage new jobs, new technologies and new emissions strategies. The budget actually supplied no extra funding for its own inadequate, principal policy tool, the $2.55 billion Emissions Reduction Fund. John Connor of the Climate Institute says the fund is likely to run out of money by the end of the year, certainly well before the promised policy review at the end of next year.
Community-based interest groups such as Solar Citizens are outraged by what their national director, Claire O’Rourke, says is the reckless, short-sighted move of locking in at least $1 billion in savage cuts to the Australian Renewable Energy Agency. This comes along with the news there is no new money for the CSIRO or the Bureau of Meteorology for climate adaptation research. Droughts, bushfires and the bleaching of the Great Barrier Reef are already major threats to jobs and growth, and, as Connor says, “weakening our knowledge base means we risk facing these threats blindfolded”. But you would not know it from this budget.
It comes as no surprise that since the scrapping of Labor’s carbon tax, emissions from the electricity sector have rebounded 5.5 per cent. Thanks to the Abbott–Hockey assault on wind farms and the like, Australia’s investment in renewable energy is stalling, which is in stark contrast to renewable energy growth outpacing investment in fossil-fuelled electricity globally.
Opposition leader Bill Shorten was derided by the Liberals as a “carbon copy” of Julia Gillard when he recently said there would be “no carbon tax” under Labor. The Nationals’ champion climate change denier, Barnaby Joyce, slammed Shorten’s reworked policy as a plan to make Australians poorer. He conveniently ignored that the emissions trading scheme proposed for electricity is a baseline and credit model that could actually lead to no overall rise in retail electricity prices.
In his budget reply speech, Shorten didn’t put his climate policy front and centre but it was up there with his “positive plans for jobs, education, healthcare ... real action on climate change through renewable energy”. And there are signs that rerunning the 2013 campaign against the “carbon tax” is a counterproductive anachronism. For one thing, Julia Gillard isn’t a candidate and her broken promise has already been punished. What the Liberals should be more worried about is the parallel this time between them and the chaos and dysfunction of the Gillard–Rudd leadership ructions that clearly soured voters.
The Coalition’s business supporters have dropped their Abbott-encouraged hostility to the idea of a market-based mechanism to deal with carbon emissions. The Business Council is not alone. The changing of the guard at the Australian Chamber of Commerce and Industry is heralding a more positive approach. The attitude is summed up by the hope that this is the last budget and the last election where there is not a bipartisan approach to emissions reduction. Not that anyone thinks rebuilding a consensus will be easy, especially if Malcolm Turnbull loses.
But if he wins, there is no guarantee he will be any more willing to confront the right of his own party. Bill Shorten is hammering the theme that Turnbull has sold out his principles on this and other contentious areas such as marriage equality and the republic. But the Climate Institute hasn’t given up all hope. One theory is the neglect of Direct Action is designed for its dramatic failure to be used as a reason to replace it with a baseline and credit scheme such as the one Turnbull championed in 2009 and Shorten has now cheekily pinched.
The Essential poll found this week that Shorten’s higher emissions targets and emissions trading proposals are approved by 57 per cent of voters and that approval includes 36 per cent of Coalition voters. Overall, just 21 per cent disapprove.
Government staffers in the budget lock-up greeted the verdict of journalists that the treasurer had failed to inspire and the document was boring as good news. The explanation for a workmanlike political document was simple: “Voters aren’t looking for excitement but steady-as-she-goes caution.”
The treasurer himself characterised it this way: “This is not a time to be splashing money around or increasing the tax burden on our economy.” This does not bear very close scrutiny. For one thing, he is still outspending the last Labor government he accuses of profligacy, splashing around 25 per cent of GDP. And it doesn’t get down to 2013 levels over the next four years. Also, the forecasts for deficit reduction in the Coalition’s first two budgets failed to materialise. Scott Morrison says the public is no longer obsessed by it. He told The Australian Financial Review that what mattered was that the public was confident the government had a plan to get to surplus by growing the economy one step at a time.
But that confidence depends on one of the key measures in the budget working in a way that not even Treasury thinks will happen. The budget papers modelled dropping the company tax rate to 25 per cent. Treasury says it would take a generation to boost growth by 1 per cent. So there is a sense of unreality about forecasts reducing the deficit to just $6 billion in 2019-20. It would depend on economic growth doubling in the next two years to almost 5 per cent.
The assessment of Australia’s most respected economic writers in the lock-up was that the budget was something to get done ahead of the election. In no real way is it a significant document for tax or economic reform. Its job is to neutralise Labor where it has been scoring points, on issues such as multinational tax avoidance and generous superannuation concessions for the rich. From there, the Coalition can embark on a relentless scare campaign. A major element of that strategy is the full-blooded assault on Labor’s negative gearing changes. As The Australian’s Dennis Shanahan wrote: “Changing negative gearing is the only Labor tax proposal Morrison left like a shag on a rock so that he and Malcolm Turnbull could fling stones of fear at it over housing values in Sydney and Melbourne.”
Housing affordability also escaped the vision thing in the budget. When challenged on it by the ABC’s Jon Faine, Turnbull stumbled badly. Young adults, according to Faine, accuse baby boomers of locking them out of the market by utilising negative gearing to fund investment housing. Turnbull retorted, “Are your kids locked out of the housing market?” Faine replied that they were. “Well, you should shell out for them,” Turnbull said. “You should support them, a wealthy man like you.” In parliament, Shorten pounced. “Is that really the prime minister’s advice for young Australians struggling to buy their first home – have rich parents?”
Turnbull, like Morrison, is accusing Labor of engaging in the politics of class envy. But can you blame them when the big hit the wealthy took on their superannuation tax concessions appears somewhat compensated for when the tax cuts for those earning above $80,000 are combined with the end of the 2 per cent deficit repair levy income tax surcharge next year? Labor says 75 per cent of taxpayers miss out. It is now proposing to extend the levy as a permanent top rate. Shadow treasurer Chris Bowen explains the rationale: “The deficit isn’t repaired.”
The state of play this weekend, as the prime minister formally launches the 10-week election campaign, is more fraught than exciting for Turnbull. There have been 12 published opinion polls since April 1. The ALP was ahead in six, the Liberals in one. Five were tied. Labor has led the last three, and five of the last six. The Libs have led no poll since April 4, and none of the last seven.
Essential has found Turnbull has halved his lead over Shorten as a “visionary” since March, to 12 points. The budget would not have helped on that score. There’s a lot of work to do in the campaign.
This article was first published in the print edition of The Saturday Paper on May 7, 2016 as "The panned reading the bland". Subscribe here.